EXISTING DEFICIENCIES IN INVESTMENT AND LENDING PLATFORMS

Imagine 2 companies — A & B — operating in the same industry in the same line of business but operating in different parts of the supply chain. Lets assume that this is a manufacturing industry.

Both companies received orders of a similar size in financial terms — say $ 50k. Company B was well known to the Director of this client and they were indeed approved for an advance payment of 40% of the order. But company A could not secure an advance and had to fend for itself to finance its pre delivery costs from a working capital perspective. The advantage that company B had was to have the trust of a client from a past interaction or other factors.

While they are indeed exposed to the same types of market and operating risks from a financial perspective they are perceived differently by lenders/investors. It is very likely that these companies A & B are subject to working capital pressures throughout their business cycle. When they do indeed see opportunities for growth they are under pressure to seek support from their existing borrowing/investing environment. This environment constitutes

1. Promoters ( capital)
2. Shareholders ( capital — preferential or otherwise)
3. Bankers ( credit limits)
4. Suppliers ( longer credit periods)
5. Customers ( advance payments)
6. Friends and wellwishers

It is very likely that many of these parties are very close to the business. Think of a supplier who knows this company A very closely having been their supplier for a long time. Assume that this supplier has received payments on time and has seen the integrity and capability of the management team to creatively solve day to day business problems. They may be very resourceful in terms of manufacturing skills or technical skills. These are not measurable quantifiable attributes that show up on financial statements or balance sheets or revenue projections. At times these numbers will not be impacted by such strengths intrinsic to the company which enable it to turn around an order that helps deliver.

This supplier may indeed possess key information but his knowledge will not help company A win the trust of an investor or lender.

The reasons are many — and possibly very right from the lender/investor perspective

1. Not now — lets see you grow some more and we can consider a small stake

2. Your industry profile does not match my risk appetite

3. Too small

4. What collateral do you have

5. How about a bank financial guarantee

6. I don’t know your references

All this because none of the investors/lenders know more than traditional/conventional ways to assess the investment/credit risk like balance sheets/cash flows and related material. In the above case it was evident that the client extended the 40% order based on past performance history of delivery and their intimate knowledge of Mark’s business. They were also truly incentivised to make the advance as they needed the supply and were confident of the risk.

If they were indeed able to make this incentivised and the banks/investors were able to get a trusted source to this information company A maybe able to get this investment on time.

Dropdeck.io now offers this same facility. Seek trusted investors/lenders and seek support. Also get “interested” parties known to the borrower/investee make crucial referential decisions that can help in the moments of truth.

Key highlights of DropDeck rounded offering are covered below.

DropDeck not only incentivises stakeholders in the investment/lending supply chain but also widens the choices for the seeker. From an investor/lender POV it diversifies their portfolios and helps gauge new types of risk by bringing in cross border opportunities. Subject to legal regulations and tax regimes this can be a very useful new source for SMEs looking to seize business opportunities and also go global.